Markets to make flat-to-positive start

Indian shares closed lower for the seventh straight session on Wednesday, as global sentiment turned pessimistic and the RBI warned of higher government spending feeding into inflation after keeping interest rates unchanged. Today the start is likely to be mildly in the green after RBI said inflation will moderate in the second half of FY19 on the back of base effect. A sharp fall in oil prices may also ease investor concerns surrounding inflation and rising twin deficits. Traders will also get some support with ASSOCHAM chief’s statement that the RBI’s decision to keep the policy rate unchanged is on the expected lines, though the less than hawkish stance has come about as a relief for the industry which had even feared a possible hike in the lending rates, following inflationary concerns. Meanwhile, Moody’s said that the global green bond issuances are likely to surge by 60 per cent to a record $250 billion this year, with India and China leading the emerging markets in this space. Stocks related to public sector banks (PSBs) will be in focus after Economic Advisory Council to the Prime Minister (EAC-PM) chairman Bibek Debroy said that accretion of fresh non-performing assets (NPAs) of PSBs has virtually stopped. However, according to recent Reserve Bank data, bad loans of Public sector banks (PSBs) stood at Rs 7.34 lakh crore by the end of second quarter this fiscal, a bulk of which came from corporate defaulters. There will be lots of important earnings announcements too, to keep the markets buzzing.

US markets ended the choppy trade in red on Wednesday after a disappointing Treasury auction renewed concerns about rising rates, spooking investors’ sentiments. Asian markets were trading mixed after European markets rebounded strongly overnight and U.S. equities closed modestly lower overnight in the final hour of trading. The Japanese stock market is rising on Thursday on the back of a weaker yen.

Back home, Indian equity benchmarks extended southward journey for seventh straight session and settled with a cut of around quarter a percent, as Reserve bank of Indian (RBI) kept repo rate unchanged. Markets started the session on optimistic note amid firm global cues. Traders took some encouragement with report that as many as 67 foreign direct investment proposals (FDI) worth Rs 117 billion were approved during the first nine months of the ongoing financial year. Some support also came with report that Indian firms mobilized Rs 21,000 crore by issuing shares to institutional investors during the December quarter of the current fiscal, resulting into an over 13-fold rise from the year-ago period. The firms had mopped up Rs 1,576 crore in the same period of the previous fiscal. The funds have been mobilized for business expansion, refinancing of debt, working capital requirements and other general corporate purposes. Meanwhile, Finance Secretary Hasmukh Adhia said that the import duty hike in 45 items announced in the Budget will earn about Rs 7,000 crore revenues to the government and is mainly intended to give a push to the MSMEs for domestic manufacturing. However, markets turned choppy after RBI kept the key policy rate unchanged at 6% for the third consecutive time in view of firming inflation. Reverse Repo rate was also maintained at 5.75%. The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel had last reduced the benchmark lending rate by 0.25 percentage points to 6% last August, bringing it to a 6-year low. Sentiments also remained dampened with RBI cutting its FY18 GVA growth to 6.6%. The policy added that retail inflation, measured by the year-on-year change in the Consumer Price Index (CPI), increased for the sixth consecutive month in December on account of a strong unfavourable base effect. Traders also remained concerned on report that India’s fiscal deficit is expected to come in at 3.5% of GDP in financial year 2018-2019, as policymakers seek to promote economic growth by reducing the pace of fiscal consolidation. According to the report by BMI Research, a unit of Fitch Group, there is room for fiscal slippage as the government seeks to achieve its 7.5% growth target. Finally, the BSE Sensex declined 113.23 points or 0.33% to 34,082.71, while the CNX Nifty was down by 21.55 points or 0.21% to 10476.70.